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What financial support can you get during the COVID-19 crisis?

In what would have been an unimaginable situation just a few short weeks ago, COVID-19 has hit New Zealand’s shores and we’re in a country-wide lockdown as we try to stop the virus spreading.

if you’re unable to work from home and not an essential worker, you may have found that your income has taken a severe hit.

With mortgages or rent to pay, bills to keep on top of and a family to feed, this can be a very scary and uncertain position to be in.

We live in a country where the wellbeing of its people is at the forefront and the government has put in place resources to help people who have found their income significantly reduced.

They’ve also implemented other ideas to help people get through these difficult times.

So what options are available to you and what benefits can you take advantage of to help make it through? In this month’s blog, we break down what’s available.

Employer Wage Subsidy Scheme

The wage subsidy is paid to employers and allows them to continue paying workers to avoid making staff redundant or reducing their hours.

If your turnover has reduced by 30% or more in comparison to last year and you are an employer, contractor, sole trader or self-employed it is likely that you will qualify.

The subsidy is paid as a lump sum directly to the employer for them to pass on to employees. The subsidy is intended to cover 12 weeks of pay for each employee at a flat rate of $585.80 for people working 20 or more hours per week and $350.00 for people working less than 20 hours per week.

For many people this will mean a significant drop in income but, depending on your weekly expenses, it is enough to keep afloat.

To find out more and apply for a wage subsidy visit the Work and Income website here.

Business Cash Flow and Tax Measures

The government has also implemented several tax-based measures to help businesses with cash flow.

These include:

  • An increase on the provisional tax threshold from $2500 to $5000 for the 2020/2021 financial year. This means that if you currently pay provisional tax of less that $5000, you’ll have until 7th February the following year to pay your tax bill. This means lower costs for smaller taxpayers and small businesses retaining cash for longer.
  • Commercial buildings are now eligible for depreciation deductions.
  • The small asset depreciation threshold has been increased from $500 to $1000 and $5000 for the 20/21 financial year to help increase cashflow this year. This will allow you to deduct the full cost of your business assets that are valued under $5,000 in the year you purchased them rather than spreading the depreciation cost over the lifetime of the asset.

We recommend that you talk to your accountant about how you can best take advantage of these measures and visit the IRD website here for more information.

Business Finance Guarantee Scheme

To protect jobs and support the economy, the government has launched a Business Finance Guarantee scheme for small to medium sized businesses.

This means that the crown, in participation with approved banks, will support new loans and increases to existing loans. The government will guarantee 80% of the risk with the banks guaranteeing the remaining 20%.

Any business with annual revenue between $250,000 and $80 million is eligible to apply and the scheme is available for loans of up to $500,000 for up to 3 years.

Redundancy Support

If you’ve lost your job or are an employer faced with making employees redundant, there are a few options depending on your circumstances.

The best bet is to visit this page of the work and income website to find out what benefits are available for your specific situation.

Protections for Renters and Tenants

In acknowledgment of the fact that many people may be unable to pay their rent, the government has increased tenants’ protection around having tenancies terminated. This is designed to ensure that families are not made homeless and that they have a safe place to maintain self-isolation.

The government has also placed a six month freeze on rent increases meaning that if you are a landlord you cannot increase your tenants’ rent.

More information can be found on the Ministry of housing and Urban Development website here.

Mortgage Repayment Holiday Scheme

New Zealand’s retail banks have agreed to let people defer payments on any residential mortgage for up to 6 months for customers affected by COVID-19.

This will mean that for 6 months you can take a break from making any payments. Just be aware that interest will still accrue during this time and be added to the principal of your loan.

Depending on how large your mortgage is, this means that after six months of non-payment your loan may have grown significantly.

You can also talk to your bank about only paying interest off your loan for a short time.

More information is available here and you can contact your bank for further details and to enquire about your options. 

Additional Financial Support

If you’ve been made redundant or had your hours reduced to the extent that you can’t cover expenses, there is additional help available. Work and Income can help with covering costs including food, accommodation, repairs, emergency medical treatment or water.

Unsurprisingly, call volumes to Work and Income are extremely high at present so if you need to explore these options, we recommend you visit the website here.

Whatever your situation, there are a range of options available and a great general resource is the COVID-19 website here.

As always, if you would like to discuss your investments or insurances, we are just a phone call or email away.